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4 Secrets to Achieve Outstanding Credit Score

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A strong business credit score is key for getting your company approved for things such as financing or trade credit.

In the same way that your personal score serves as an indicator of your overall financial rating, your business credit scores also show creditors how trustworthy your company is when it comes to credit.

Your business credit report is your resume that creditors and investors can look into. If they see you as trustworthy, they are more likely to give you the loan to give your business the push that it needs.

Getting Good with Your Credit Score

Many small-time businesses often have trouble establishing their credit after a while because of various factors, some of which could include bad investments and less-than-ideal business practices that could have more cost-effective alternatives.

These factors often add up and could lead to things, such as increased debt and not being able to pay on time, all of which can negatively impact your credit score in the long run.  

However, the good news is that there is hope, especially to starting entrepreneurs looking to stay long-term in their business to see it grow. Here are five secrets that will help you achieve outstanding credit portfolio for your business:

  1. Keep your information updated.

Credit bureaus exist to collect data and assign credit scores depending on your performance and history as a borrower, and it’s important that you constantly update them on the state of your business as well as the rate that you pay back your loans.  

Some measures could include updating your business information and uploading current financial statements. The general rule of thumb when it comes to these matters is that the more detailed and complete your credit profile, the better.

You should also watch out for public records that could be filed in your business’ name. These can include bankruptcies, court rulings not in your favor, and liens. These negative marks can make an astounding effect on your business credit report.

Even when you’ve already made good in terms of paying back your loans, potential creditors, financial institutions, or even future investors would at least think twice about your business when looking at your business’ credit report before investing if you let the interest accrue.

  1. Borrow only from lenders that report to credit bureaus.

Credit bureaus are a type of collection agency that collects account information (business name, type, size, year of operations, financial statements, credit history, performance, etc.).

This information is then forwarded to an assessing agency or private lenders, which evaluate this information, and credit rating agencies, which assesses how credible your business is and whether it can be trusted to handle and pay back loans.

Giving out this information is extremely crucial not just for borrowers, but also for investors and lenders, and all for various reasons, not the least of which is credibility also on their part.

  1. Don’t just pay on time – pay ahead!

This is perhaps the most important secret for achieving a good credit score with your creditors, as well as being the most difficult.

Though different methods of assigning business scores exist depending on the companies or credit bureaus that employ them, your history of paying creditors is the biggest factor that will come into play.

While paying on time is good, being able to pay ahead of time reinforces on your creditors the impression that you can be trusted to pay your loans and make good on their expectations of financial return (it also saves you from having to deal with higher interest rates later on).

This positive effect on your credit history will eventually allow you to make more loans with less interest rates and a more flexible schedule when it comes to paying your creditors back.

  1. Start trade lines, preferably with your suppliers.

Trade lines do more than simply stocking your inventory with supplies, ingredients, and material from third-party vendors – detailing them in your financial report can actually help you build your business credit.

This is because suppliers are capable of extending trade credit to their partners when they see fit, which lets you continue paying for an extended period of time after receiving the inventory. As long as the terms of the trade agreement are met, your supplier can report your payments to a credit bureau and improve your business credit standing.

How Accounting Services Can Help You

Small business owners should avail of professional accounting services. The decision of setting up the right type of business type that will benefits you in terms of assets and tax is something that should be consulted with.

Being your own bookkeeper and preparing financial statements by yourself can also be incredibly time-consuming, which a reliable accounting service can do for you easily and effectively.

Aside from routine bookkeeping tasks, many accounting firms in Singapore will also advise clients on how to make effective financial strategies that will advance your business or help it weather through when times can be difficult for keeping the business afloat.

If it’s your first time with a loan or if you’re unfamiliar with the process of acquiring your credit portfolio, an accountant or bookkeeper will be more than happy to help you with the necessary procedures and paperwork, as well as taking the necessary measures to pay your debt on time.

 

(Disclaimer: This list is compiled in no particular order.)

 

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